Conditional versus Unconditional Models for VaR Measurement

Krzysztof Echaust , Małgorzata Just

Abstract

Accurate risk prediction plays an increasing role in effective risk management process. Nowadays, the most common measure of risk is the Value at Risk (VaR) but there are many ways of its measurement. In this paper unconditional and conditional models are applied and compared using backtesting procedures. We examine several models like Gaussian, stable, NIG and generalized Pareto distributions as an unconditional models and GARCH, EWMA and GARCH-EVT models as a conditional approach. Results are presented for long and short position applying 5 world indexes, 4 exchange rates and 2 metals. Conditional models perform better than unconditional models. Especially the GARCH-EVT model enables to estimate the VaR correctly regardless of considered assets.
Author Krzysztof Echaust (WIiGE / KBO)
Krzysztof Echaust,,
- Department of Operations Research
, Małgorzata Just - Uniwersytet Przyrodniczy w Poznaniu
Małgorzata Just,,
-
Journal seriesSSRN Electronic Journal, ISSN 1556-5068, (0 pkt)
Issue year2014
Pages1-20
Publication size in sheets0.95
Keywords in EnglishValue-at-Risk, conditional models, unconditional models, stable distribution, NIG distribution, generalized Pareto distribution, Extreme Value Theory, GARCH, EWMA, GARCH-EVT
DOIDOI:10.2139/ssrn.2365588
Languageen angielski
Score (nominal)5
Score sourcejournalList
ScoreMinisterial score = 0.0, 18-12-2019, ArticleFromJournal
Ministerial score (2013-2016) = 5.0, 18-12-2019, ArticleFromJournal
Publication indicators WoS Citations = 0
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